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Preliminary Municipalization Valuation Briefing Summary
Members of the Superior City Council have expressed an interest in purchasing the water, gas, and electric utilities from Superior Water, Light, and Power (“SWL&P”) and its parent company, ALLETE, Inc. (“ALLETE”), and is in the process of developing a valuation and feasibility study to identify the costs of acquiring SWL&P’s water, natural gas, and electric systems. SWL&P retained Concentric Energy Advisors, Inc. (“Concentric”) to develop a preliminary valuation of SWL&P’s assets to estimate the initial cost of municipalization.
Based on a preliminary analysis, Concentric estimates the total costs of acquisition for SWL&P to be $274-$306 million as of end of year 2030. The estimates in this Briefing focus on the immediate purchase price and direct expenses associated with acquiring the water, electric, and natural gas systems. However, a full feasibility study would include a comprehensive review of anticipated acquisition costs in more detail and potentially increase the estimate of municipalization costs.
This preliminary acquisition cost estimate includes the following major categories of costs:
- Asset Value: The asset value range is $187.0-$219.1 million at end of year 2030, which includes the fair market value of the assets to be acquired from SWL&P.
- Separation Costs: Costs incurred to physically separate the municipal system from the remaining assets, including radio infrastructure to support meters and other equipment, estimated at $3.1 million at the end of year 2030.
- Startup and Transaction Costs: Startup costs include initial capital expenditure cycle, staff and management, IT systems, and reserve funds, as well as transaction costs such as legal fees, detailed engineering and consulting fees, and debt issuance costs. Costs are estimated at $83.6-$84.1 million at the end of year 2030.
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All views expressed by the authors are solely the authors’ current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, related companies, or clients. The authors’ views are based upon information the authors consider reliable at the time of publication. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.